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Jack the Billionaire’s Bank

November 10th, 2018 | Tags:
Dickson C. Igwe. Photo: VINO/File
By Dickson C. Igwe

Jack the Billionaire Investor never really loses.

When the global economy comes crashing down as a result of unsustainable mortgage and housing debt, Jack who is better informed than the rest through his posse of financial managers, migrates his wealth away from stocks, and buys bonds from Uncle Sam: the safest form of investment.

Jack smiles from ear to ear. Then when the global economy is growing rapidly, even overheating, Jack rakes in hundreds of billions of dollars in profits and revenues from his corporations and investment funds.

When people are wrapping themselves and their families up in easily available debt, Jack laughs all the way to the bank.

 Jack owns the bank. The interest payments to the bank by Tom the consumer ultimately ends up in Jack’s back pockets.

Then when everything goes south because people are mad they have been taken for a ride. Jack’s wealth keeps the government alive.

Jack eventually ensures the politician puts a FOR SALE sign on his office door. Jack is BOSS!  OK. Consumers and governments hold most of the 250 trillion dollars of global debt.

Debt takes two forms: private and public debt. Private debt is held by businesses and consumers.

Public debt is held by governments. The preceding are the world’s borrowers.

Debt is the lifeline of the world economic ecosystem. Why: because the billions of consumers who want to live the life of the Jones’s, require some form of debt to exist comfortably.

On the other side of the debt metric sits the big and small investor. Jack the Billionaire Investor owns 120 trillion dollars of wealth.

The rest of global wealth is owned by large and small investors. Wealth is the reason why debt can exist. Without wealth there would be nothing to borrow.

OK. The role of the Central Bank is to act as key intermediary in the management and regulation of the world monetary system.

This role is critical. There would be no global economy to speak of; or the global economy would be a very different animal today, without a central regulating bank. Powerful Central Banks are banks that are trusted by investors.

Investors understand the fact that the local retail high street bank gets its credibility from the Central Bank. The retail and investment bank is regulated by the Central Bank and government. The Central Bank- owned by the investor—not government—is the global bank of last resort.

Yes governments manage the environment the Central Bank operates within. However, Jack the Investor owns the Central Bank. How? Because the Central Bank uses Jack’s wealth and credibility as a, “get out of jail free card.”

Investors who buy bonds from Central Banks expect to be paid their cash back with interest at a future date without any thought that there will be an issue preventing prompt payment.

The integrity of the global financial system depends upon trust in the security of the Federal Reserve and key Central Banks by the Investor. Central Banks that investors trust, sit in very secure jurisdictions that are transparent, accountable, and democratic, with working national institutions that possess integrity.

Central Banks are backed by the political, legal, and economic establishment. Consequently, the Chairman of the Federal Reserve or Governors of Central Banks and their directors are hugely important and significant positions.

The US Federal Reserve, is in effect is the world’s Central Bank. Why: because in time of crisis, investors will put their cash into the bank that is the safest and most secure. The USA being the world’s most powerful economy, managing the world’s reserve currency, the dollar, with military power second to none, is considered the safest place for investment, when there is uncertainty and volatility. 

Trust in the US Federal Reserve, and the world’s key Central Banks, to maintain the credibility and integrity of the global financial system, is the heartbeat of global finance. 

To be continued

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